.png){kind=logo}
ITC shares faced strong selling pressure after the government announced a steep hike in cigarette excise duty. The stock slipped to its lowest level in 3 years, marking a rough start to 2026 for investors. This reflects rising concerns over earnings, sales volumes, and pricing challenges. The sharp fall in ITC’s share price followed a series of downgrades and target cuts by major domestic and global brokerages.
The excise duty hike came as a surprise to the market. Taxes on cigarettes had remained stable for several years. This stability helped ITC grow cigarette volumes steadily and supported investor confidence. The sudden and large increase changed the outlook for the company’s core business.
On Friday, ITC shares traded around Rs. 349, falling more than 4% in early deals. The stock has erased over Rs. 70,000 crore in market value since the start of January. Investors reacted quickly to fears of lower demand, weaker profit margins, and higher risks from illegal cigarette sales.
Several brokerages revised their views on the stock. Nomura issued a double downgrade, cutting its rating to ‘Reduce’ from ‘Buy’. It slashed its price target to Rs. 340 from Rs. 540. Nomura expects cigarette volumes to fall sharply in the coming financial year. Lower sales and higher taxes could hurt earnings across the cigarette segment.
Motilal Oswal also downgraded ITC to ‘Neutral’ from ‘Buy’ and reduced its target price to Rs. 400. The brokerage said ITC may need to raise cigarette prices by at least 25% across its portfolio just to maintain current earnings per cigarette stick. Such a sharp price increase remains rare in the industry.
Nuvama downgraded the stock to ‘Hold’ and cut its price target range. It expects ITC to increase prices by nearly 20%. The brokerage reduced earnings estimates for the next two financial years and lowered the valuation multiple for the cigarette business. However, it avoided a deeper downgrade due to ITC’s strong dividend yield and support from other businesses.
Global brokerages echoed similar concerns. Morgan Stanley downgraded the stock to ‘Equalweight’ and cut its target to Rs. 366. JPMorgan moved to a neutral stance and lowered its target to Rs. 375. Jefferies downgraded ITC to ‘Hold’ with a target of Rs. 400. Kotak cut its rating to ‘Reduce’ and lowered its target to Rs. 350, citing the need for price hikes of up to 35% to protect revenues.
UBS remained positive on the stock but reduced its target to Rs. 430. It flagged uncertainty around how quickly ITC would pass on higher taxes and how consumers would respond to higher cigarette prices.
The cigarette excise hike creates multiple challenges. Higher prices may reduce legal cigarette sales. Some consumers may shift to cheaper or illegal products. Profit margins may remain under pressure even after price hikes. These risks limit near-term earnings growth.
ITC’s food, FMCG, and paper businesses provide some balance. However, cigarettes still contribute a large share of profits. That keeps the stock sensitive to policy changes.
The current ITC share price drop reflects uncertainty rather than panic. Markets now await clarity on pricing actions and volume trends in the coming months.
Also Read – LIC Loses Rs. 11,000 Crore as ITC Shares Crash 14% After Cigarette Tax Hike
